How Apartment Leasing Became Part of the New American Dream
Recent trends that suggest Americans are redefining the American Dream to not so much include home ownership certainly bode well for the apartment leasing industry. And while analysts and pundits may suggest the erosion of a U.S. cultural institution is the result of one of the worst economic downfalls in the country, other reasons may be at play.
Ownership of a home, car, boat or what-have-you is binding, and today’s society has become more Free Willy and conducive to an apartment lifestyle, one that can be centered in high density urban areas where dining, transportation and entertainment are non-committal.
The change in ideology is impacting American in its mid-section, which is telling.
Increased Home Ownership Costs Have Consequences
Home ownership for the middle class has slowly slipped, according to a study released in October by consumer credit tracker Interest.com. In the last two decades, home ownership among Americans has dropped to 65 percent. That’s the lowest it’s been since pastels in home décor were hot and the Yugo was not.
Cost is a big factor. Home prices have climbed more than five times the increase in incomes in the last year in 25 of the U.S. metropolitan areas. In only eight of those cities, median-income households can afford a median-priced home. That’s even after historically low interest rates for the average cost of a 30-year, fixed-rate home loan are historically low at 4.43 percent.
President Obama has tried to recharge home ownership to help stimulate the economy – reminiscent of the FDR days when the introduction of 30-year mortgages sent more Americans to sign on the dotted line. But Americans seem to be resolved to chasing a new kind of dream, one loaded with more reasons that do not favor home ownership.
Apartment Leasing Displaces Home Ownership for Gen Y
Younger adults are buying fewer homes and cars and taking on less debt, according to a February social and demographic trends study released by Pew Research. From 2001-11, the percentage of home owners headed by young adults dropped four points to 34 percent. In 2011, only 53 out of every 1,000 eligible young adult renters became a home owner, compared to 85 out of every 1,000 10 years earlier.
The result is a boom in city population not seen since the 1920s. Echo Boomers or Millenials are renting in the big cities to be closer to public transit and bigger jobs. Call it a Maverick mentality, but short-term commitments on housing enable today’s youth to move more freely about the country. They’ve authored the new normal in the job market by hopping from one employer to the next, dropping the average stay of the American worker at one work place to 4.6 years.
Also, those slumped in college debt or have low paying jobs simply can’t afford to buy, so leasing is the most natural option. According to the Federal Reserve, debt among college graduates or dropouts in first quarter 2012 was higher than credit card debt. And it wasn’t expected to get any better.
Home Ownership Continues to be Pricey for Seniors
The outlook for more Americans renting could be brighter for property owners, although it could be at the expense of another American Dream, retiring early. Americans are working longer, and in the process their total wealth is diminishing.
One of two studies released in June suggests that older Americans are at risk of economic hardship. Seniors age 65 and older are earning almost 60 percent less than the median income of households headed by 45- to 65-year-olds. Owning a home – with or without a mortgage – could become a financial burden for those who by standards 20 years ago should be enjoying their golden years.
The Bipartisan Policy Center report suggests that housing affordability is a serious issue for seniors. About 30 percent of senior home owners spend about 30 percent of their income on housing and 17 percent pay at least half their income. Don’t forget for those seniors who own their own homes that energy costs and taxes aren’t getting any cheaper.
“Home Free” Now Means Debt Free
Going into debt to own a home doesn’t have the ring to it that it once had. The lingering effects of the Great Recession may be prompting some to strive for a debt-free lifestyle, so suggests a recent Credit.com survey.
Of 1,000 respondents 18 and older to GFK Custom Research’s survey for Credit.com, about 28 percent said the American Dream is retiring financially secure at age 65. Only 18.2 percent said that owning a home was the ultimate goal, and, generally speaking, raising a family and having a pair of cars in the garage is no longer that important.
Credit.com Co-Founder and Chairman Adam Levin said in statement on the company’s website that the results of the survey confirm his suspicion that “there’s a great deal of nostalgia for a promise that increasingly and tragically no longer exists.” The American Dream of owning a home, he says, has changed.
The alternative, naturally, is leasing a home or an apartment, where residents aren’t saddled with long-term debt, and a more mobile lifestyle is available. High density “live, work and play” developments next to public transportation outlets are becoming increasingly more popular. It’s a pay-as-you-go way of life, and it seems to be here to stay.
As the American Dream of owning a home fades, a new one is emerging. It’s called renting.